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Sunday, March 23, 2008

A Matter Of Indian Economics

UPA has a plan, no programme

What does a government do when it has high intentions but is weighed down by self-defeating inhibitions ? It can only talk endlessly. All the actions of the UPA in the last four years conveyed only one thing. That it is a government in chains. This aspect came to sharp focus in the case of Indo-US nuclear deal impasse. On other foreign policy matters as well this is evident. On the economic front, the UPA so far escaped scrutiny because of two reasons.

Firstly, the six-year period under the NDA was a dream come true for the globalisation lobby. The NDA initiatives instantaneously produced a flurry of economic activity, investment boom, Sensex recovery, consumerism, big growth in the service sector and a clear spurt in export earning. This euphoria resulted in the India Shining story creating the ever-widening social disparity. The NDA paid a heavy price for the “audacity of hope” that it triggered off but the UPA benefited both politically and on the economic front. It was nothing but the foundation that the NDA laid, which resulted in the big India growth odyssey of 2004-08.

Secondly, the perception that Dr. Manmohan Singh-P. Chidambaram team is all set to carry forward the NDA legacy created the investor confidence that sustained the growth. The UPA did not do anything to propel this, the slow down in the manufacturing sector tells the tragic tale of a government that has failed to set the pace.

For instance, the infrastructure, power generation, road building and modernisation of transport, have all languished under the UPA. The same fate visited education; professional institutions, science and technology establishments. Agriculture is the biggest disaster under UPA. Hence it is making such a racket in the name of loan waiver. The UPA is really not interested in modernising Indian agriculture or improving the lot of the Indian farmer.

A careful study of the Economic Survey, 2007-2008 exposes the unfinished tasks before the UPA which it is never going to fulfill in this last leg of its tenure. As the Finance Minister told the Parliament last week he will let the next government foot the bill for his loan waiver for the farmer in this year’s budget. But what he left unsaid was that the burden of meeting the IMF-World Bank agenda of furthering the reform has also been left for the next government.

The problem is it is being projected as the only way India can hope to emerge an economic giant. The other alternative is an economic slide down. That is why many experts believe that the UPA team has mismanaged the economy. Any government that attempts to carry on with the reforms underlined in the Economic Survey will land itself into serious political trouble.

Take for instance the following. On coal mining the proposal is to amend Coal Mines Nationalisation Act to allow regulated private entry. So far so good. The idea is to privatise old coal mines to improve recovery of “in-place” reserves by 5-10 per cent, subject to a professional, independent regulator for safety and environment issues.

On PSUs it wants to complete the process of selling of 5-10 per cent equity in previously identified profit-making non-navratnas. It further says, list all unlisted public sector enterprises and sell a minimum of 10 per cent of equity to the public.

Auction all loss-making PSUs that cannot be revived. For those in which net worth is zero, the proposal is to allow negative bidding in the form of debt write-off. Has the government alerted the Left on this? For Industrial decontrol the Survey wants to phase-out control on sugar, fertiliser and drugs.

The Survey wants all old oil fields to be given to private sector for application of Improved/Enhanced Oil Recovery Techniques.

The real red rag comes in the form of Factories Act: Increase workweek to 60 hours (from 48) and daily limit to 12 hours to meet seasonal demand through overtime, it says. Are the trade unions agreeable?

The MNCs who want to increase the productivity of the employee will be too happy. But the side effect is the unacceptable rise in unemployment in the country. Already Indian companies are creating more jobs for foreigners as a result of globalisation. But that has to be dealt with separately.

Now the Survey comes to one of the most neglected areas under the UPA. Power shortage has become the bane of our day today life. So the Survey proposes: State Electricity Regulatory Commissions should notify rational, credible, cross-subsidy for open access so that it can become a reality. Open Access should include access to electricity pillars to string a wire, it says. Accountability for T&D losses on this wire will be with the wire owner and not on the distribution company that owns the towers.

The government will permit private corporate investment in nuclear power, subject to regulation by AERB and AEC (Atomic Energy Commission), it says. All these are priority reforms emphasised in the Survey. On Railways it says Public Sector Rail Track company will own new tracks and signals but pleads for free entry of private and public-private partnership rail freight companies.

Other ideas are like this: public transport (bus) systems in metros and large cities must be run by organised private companies that can use modern logistics and back office systems for planning routes and timings, acquiring and analysing data on usage densities and running an integrated people movement system. A comprehensive system of road parking fees must be devised and introduced in metros and large congested cities, it says.

Bankruptcy law: Either introduce a separate section on Bankruptcy in the Company Law or introduce a new bankruptcy law that facilitates exit of old/failed management as expeditiously as possible.

Touted as the most urgent initiatives to accelerate growth, these points in the Economic Survey read like a recap from the World Bank Country Paper 2004. Some of these reforms could have been attempted by the UPA during its tenure. It did not. Others need wider political consensus. Does the UPA have the political nerve to initiate them now? The ruling coalition would rather buy time for announcing more of economically disastrous bailouts of the populist genre.

By R. Balashankar


Forget yourself for others, and others will never forget you.

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